Stable returns and a growing demand for food and other agricultural products in China are likely to spur Chinese investment in Australian farmland, according to analysts.
As of March, returns on investment in this sector had risen 8.46 per cent year on year, with income contributing 5.15 per cent and appreciation returns 3.17 per cent, according to an index compiled by the Asian Association for Investors in Non-Listed Real Estate Vehicles (ANREV).
“Farmland as an asset is getting more traction in the past years, and more institutional investors might invest in the sector considering the diversification benefits for their portfolios, as well as the returns,” said Amelie Delaunay, director of research and professional standards at ANREV.
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Australia, with one of the world’s largest accumulations of agricultural land, is an attractive target for Chinese investment, given the Asian country’s huge population of 1.4 billion and the role food imports play in ensuring its food security. Chinese investors were the largest foreign owners of this asset class, according to Australian Taxation Office. As of June 2020, 13.8 per cent of Australia’s total agricultural land or 53 million hectares was held by foreign investors, 1.7 per cent more than the previous year. Among these, Chinese investors had the largest holding and accounted for 2.4 per cent or 9.2 million hectares.
Besides farmland, foreign holdings also cover investment in vehicles or funds that buy stakes in agricultural lands.
The Chinese appetite for investment in this sector is likely to remain strong despite frosty relations between Canberra and Beijing, and restrictions on foreign investment in Australia, which include the need for government approval for investments over A$15 million (US$10.7 million).
“Due to the finite availability of high-quality farmland globally, and pressure from increased urban sprawls further diminishing the availability, Australia’s farmland is a popular asset class,” said Sam Triggs, rural property sales manager at New South Wales-based William Inglis and Son – Inglis Rural property.
The worsening relations between China and Australia have been partially blamed for a decline in Chinese investment in Australian property. The total investment in Australian property by government and private enterprises in China fell by more than a third to US$615 million last year, according to Real Capital Analytics, which tracks deals worth at least US$10 million.
Following a call by Canberra for an inquiry into the origins of the coronavirus pandemic, Beijing has unofficially and informally banned Australian coal, sugar, barley, lobster, wine, copper and log timber. China has also ordered the suspension of five meat processors from exporting beef to China, followed by the suspension of six abattoirs last year. In March, Beijing imposed duties on cheap Australian wine.
Meanwhile, Chinese investment in farmlands also benefits Australia, as 55 per cent of the country’s land is dedicated to agriculture. Typically, agricultural lands account for 11 per cent of Australia’s exports, 1.9 per cent of its economic output, 2.6 per cent of total employment and 4 per cent of inbound investment.
“Chinese investors appreciate Australian farmland for the same reasons as other investors, and also for another – the fast-growing mainland market [for food and agricultural products],” said Georg Chmiel, chairman of Juwai IQI, a Kuala Lumpur-based real estate technology group serving Asian buyers.
“Chinese demand for imported commodities and refined agricultural products will only grow in the years to come. China is the largest buyer and accounts for about 18 per cent of Australian farming exports, according to official 2019- 2020 data,” he added.
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